An income-replacement-benefit (IRB) overpayment is not as good news as it sounds for injury victims, as a recent case demonstrates.
The problem comes when the insurer requests repayment of the excess funds, which is what happened in the case of Schuknecht v Economical Insurance Company before Ontario’s Licence Appeal Tribunal.
The adjudicator in the case ordered the 49-year-old claimant to reimburse her insurer for almost $5,000 in IRB overpayments after finding that the company was entitled to offset other sources of income, she received following a car accident that left her unable to return to her job in the financial industry.
Unfortunately, the intricacies of the province’s Statutory Accident Benefits Schedule (SABS) mean that IRB overpayments are a common occurrence for those involved in motor vehicle accidents.
The risk of an overpayment is generally outweighed by the value of having IRBs flow quickly to you in the immediate aftermath of an accident when you need it most, allowing you to continue your life with minimal impact on your lifestyle and pay for essentials including groceries, rent and utilities.
The good news is that a personal injury lawyer can help you minimize the impact of a repayment request, allowing you to focus on your recovery without having to worry any more than necessary about your finances.
Why IRB overpayments happen
Income replacement benefits are paid at 70 per cent of a claimant’s pre-accident gross income, up to a maximum of $400 per week, and are often the first income benefits to kick in as injury victims begin their recovery.
Insurers generally calculate the amount owing based on a form known as an OCF-2, the Employers Confirmation Form. The information on the form does not always account properly for any other sources of income that may become available to you as a result of the accident, including various types of disability benefits.
If you manage to secure other benefits, the insurance company providing your IRBs may be entitled to deduct those amounts, leading to a recalculation of your IRB payment. Depending on how long your other benefits have been in place, they may also be able to backdate their IRB recalculation and claim back any extra payments made.
What is deductible from your IRB coverage?
Under the SABS, accident benefit insurers calculating IRB entitlements can deduct as income any short-term disability (STD), long-term disability (LTD) and Canadian Pension Plan (CPP) disability benefits received by claimants. Court decisions suggest other types of income not specifically mentioned in the legislation, including employment insurance benefits, may also be deductible for the purposes of IRB calculations.
Workers covered by STD or LTD policies are often able to recover a large proportion of their pre-accident salaries in benefits, which raises the risk of double recovery if IRBs are paid on top.
CPP disability payments are a particular risk for IRB overpayments because of the delays that plague the processing system, especially in the wake of the COVID-19 pandemic. As a result, successful claimants often receive retroactive payments in the form of a large lump sum, covering periods when they had already received IRB payments.
Managing IRB overpayments
Information is power when it comes to managing the risk of an IRB overpayment, and the process begins the moment you visit your personal injury lawyer.
The team at Edwards Pollard helps review our clients’ collateral benefits entitlements such as STD, LTD and CPP disability, checking the wording of each policy and talking claimants through the possibility of IRB overpayment in the event they are successful in obtaining benefits.
It’s important to keep lines of communication open with your lawyer throughout your matter. Inform your counsel when you begin receiving any other benefit payments so that your IRB entitlement can be adjusted as quickly as possible, minimizing the amount of any overpayment.
Although it can be scary to receive a demand for the repayment of thousands of dollars in IRBs, a lawyer can help to negotiate a schedule for reimbursements. Most insurers tend to be reasonable in such situations, as long as there is no suggestion of fraud or misrepresentation on your IRB application.
In many cases, the overpayment can be recouped via a reduction in future IRB payments, or it can be worked into a settlement of any accident benefits claims.
Your lawyer can also check the accuracy of the insurer’s IRB recalculation and ensure that the company is not seeking reimbursement for amounts that it is not entitled to claim, such as for older payments made outside the limitation period.
If you have questions concerning IRB overpayments, contact Edwards Pollard LLP. Call us at (289) 529-0404 or complete the contact form.
